Truth. Lies. And why no one is holding the government accountable. A special hour.

Condoleezza Rice versus Richard Clarke. How do the 9/11 widows make sense of the commission testimony?

BREITWEISER: If we can't remove politics from it. If they have to go down to that level, then how in God's name can we expect the world to come together.

ANNOUNCER: And who decides how your tax dollars are used? Back room decisions about school vouchers that channel money away from your child's public school into private education.

NOBLE: If you can't get the money from Congress directly, because there's a lot of opposition to the school voucher program, you go to your friends within the administration. You go to your friends within the Department of Education and you go after the discretionary money.

ANNOUNCER: And the truth about your retirement and what you can count on from social security.

SLOAN: If any corporation kept books like the federal government, they'd all in jail.

MOYERS: Welcome to NOW. What a week. Richard Clarke says one thing, Condoleezza Rice the opposite. At the 9/11 hearings, Republican commissioners turn on Democratic witnesses, Democrats try to discredit the Republicans. Even the highest officials on the same team disagree. "Mr. Clarke was out of the loop," says one. "No he wasn't," says another. And both should know. Once again journalists covering the news wrestle with one of the oldest questions of all: who's telling the truth? And out beyond the merry-go-round of beltway spin, what's a citizen to make of it all?

BRANCACCIO: What everyone was trying to find out is what the Bush administration did, or did not do, with information about Osama bin Laden and Al Qaeda before the terrorists struck. As we told you in a report last fall, no one wanted to know more, or tried harder to find out, than the 9/11 widows who sat through those hearings all week. One came home with her questions still unanswered. Our report is produced by Na Eng.

BREITWEISER: I've waited 2 and a half years. I just wanna know I'm safe living here.

BRANCACCIO: When we first met Kristen Breitweiser, Mindy Kleinberg, Patty Casazza, Lori van Auken, they were already known as the Jersey Girls  four moms from the suburbs who banded together after their husbands were killed on 9/11, all four determined to find out exactly what happened that day, and exactly what the government is doing to prevent another attack.

BREITWEISER: We have no expertise. But what we have is a passion, and a drive to right the wrongs. And to fix the problems. And to find the truth.

BRANCACCIO: It's fair to say that without the efforts of the Jersey Girls, there might not be a 9/11 Commission. Their very public campaign for answers forced the administration to reverse its decision not to appoint an independent investigation.

KLEINBERG: Please, pick up the phone. Call your senators. Call your congressman. Tell them that you want to be safe. Tell them that you want an independent investigation.

BRANCACCIO: The commission is supposed to be probing every corner of government and then recommend how it needs to change. The women feel strongly that our government leaders need to be held accountable for what they see as the security failures that led to 9/11.

BREITWEISER: I don't understand how George Tenet could still have his job. I don't understand how Robert Mueller could still have his job. I don't understand how Condoleezza Rice could still have her job. Why? Because they completely and utterly failed.

BRANCACCIO: They came to the hearings this week with mixed emotions, satisfaction that the hearings were happening at all, but also frustration, because they had done more than campaign for an independent investigation. They'd been doing one of their own, and passing on what they'd found to the commission and as the hearings unfolded, they felt a growing sense that many of the questions they had been asking, and many of the witnesses they had been talking to would not be heard.

BRANCACCIO: What do you think your greatest disappointment was from those two days of hearings?

BREITWEISER: I think my greatest disappointment was really the commissioners' behavior with regard to lowering themselves to partisan politics. We fought so hard to get this commission created. We wanted an independent commission. We wanted it to be bipartisan. To see them go to that level, really, it was upsetting. It's dishonoring of the dead.

BRANCACCIO: Were there questions that you wanted asked that you didn't hear?

BREITWEISER: Yeah, there were. The families actually submitted the commissioners themselves a list of our questions for each of the witnesses. And we spent enormous amount of time researching those questions. For example, starting off with the State Department, it would have been nice to have Secretary Albright and Powell asked about severing money lines that fund terrorism, sanctioning countries that sponsor terrorism.

With regard to the Defense Department. We would have liked to have known why after spending billions of dollars on defense, our Department of Defense was hit by a commercial airliner a full hour after the nation was officially under attack. I find that upsetting that that happened. It's inconceivable to me. Where were the F16s?

BRANCACCIO: What do you suppose accounts for the fact that many of the questions the widows suggested were not asked?

BREITWEISER: I know, actually, because I spoke to one of the commissioners. We were told that it's not the Washington way. That, you know, pointed questions such as that, it's really not the forum. I don't find that acceptable.

BRANCACCIO: This notion that it's not the Washington way to ask pointed questions, it says something, I think, about the whole approach that was taken to these issues.

BREITWEISER: Listen, it's certainly not a new issue that we've had with the Commission. We have fought with the Commission from its very first days that they needed to be more aggressive. That they needed to hold more hard hitting investigative hearings. And the Commission has taken a more polite tact that is against what the families wanted. We wanted them to use their subpoena power. We wanted them to ask tough questions.

BRANCACCIO: What about the people called to testify during those two days? Should they have mixed it up more? Should it have been a different roster of people in some way?

BREITWEISER: I think that the roster was good. I think the roster was missing a key person, namely National Security Advisor Condoleezza Rice.

The biggest question, the elephant in the room, is, you know, how is it possible of being National Security Advisor that you came out with a public statement in May of 2002 that you didn't know planes could be used as missiles? We have an intelligence history and record that clearly is replete with instances of planes possibly being used as missiles. In my humble opinion, it is one of two things. Either she's lying. Or she's incompetent. And in either case, she needs to come before the American people so that we can find out what the case is and hold her accountable and determine whether or not she is fit for her job.

BRANCACCIO: You raise this issue of partisanship. Do you ever worry that you're being used for those purposes? I had the radio on the other day. And there was conservative talk radio host, Rush Limbaugh, going on about some of the 9/11 widows suggesting that you've been coached by the Democrats.

RUSH LIMBAUGH: It sounds to me not only were women coached, but it sounds to me like somebody fed them to the networks.

BREITWEISER: I would have encouraged him to do his homework a little bit better. I voted for President Bush and so did my husband. I believed in him. And I believe when a President takes an oath of office, he takes an oath of office to lead, protect and serve. I think that the least President Bush could do for the families is to come forward and open a dialogue and discuss 9/11.

BRANCACCIO: And you're not seeing in that committee, at those hearings, this working together to making the world a safer place?

BREITWEISER: No, and that's what I'm saying. If we can't even get along on a commission that was set up by the families working so hard, begging to have this commission. We literally begged. If they can't even remove politics from it, if they have to go down to that level, how in the God's name can we expect the world to come together?

MOYERS: Joining me now is someone you would have seen reporting on the 9-11 Hearings this week, if you were watching the ABC news program; NIGHTLINE. She's a correspondent there. Before going to ABC Michel Martin worked for THE WASHINGTON POST and then THE WALL STREET JOURNAL. Welcome to NOW.

MARTIN: Thank you.

MOYERS: What does that report we just saw say about what you covered this week in Washington?

MARTIN: Well, one of the things it aptly describes is the disconnect between what's going on in Washington and what the rest of the country expects from Washington. You heard one of the widows talk about her disappointment at the level of partisanship that was evident in the hearings.

Which is evident I have to say on the second day far more than on the first in the questioning of Richard Clarke. But what she was saying is what we want is performance. We are looking for accountability. We want real answers and truthful answers.

And it is clear that by the second day that what is at stake for both political parties became very much evident in the questioning when the members of the commission, which is evenly divided between Republicans and Democrats, seemed to feel a need to protect the political interests of each party.

MOYERS: There was a moment when I felt watching, that this commission was going to move beyond the traditional back-and-forth; he said, she said and really get to the root of some of this. But then, as you say, it took a turn. What happened?

MARTIN: Well, it has to be said that the staff has done some tremendous investigative work and that this is only the "tip of the iceberg." What you saw publicly was only a portion of the work that has been done. There's been a number of hearings "behind closed doors."

For example, Richard Clarke testified 15 hours behind closed doors before the hearings that you saw this week. So what you're seeing in public is not all the work of the commission. And they've done some very probing work into accountability.

They've identified, for example, previous opportunities to eliminate Osama bin Laden that were missed by the previous administration. So there is a lot of hard questioning being done. Not all of it in public.

But I think that it's very clear that this book by Richard Clarke has changed the game. You know he was a person at a very high level. He's worked under four Presidents. He had a very important job. He has responsibility and authority. He was at all of the key meetings.

Well, the fact that he was at all of the key meetings is something that is now in dispute. But that he has written a very critical account of the administration's effort to fight terrorism. And that created a context for these hearings that had to be addressed.

I mean starting Sunday there was an interview he did with 60 MINITES, in advance of the publication of his book. The White House took the extraordinary step of publishing kind of a point-by-point rebuttal just as that interview was going to air. This is quite remarkable for a statement to come from The White House in response to a book and a television interview. At least it's remarkable in this White House.

MOYERS: Stephen Hess, an old timer in Washington. He's been there ever since he worked for the Eisenhower and Nixon administration. He said this is the most ferocious attack on anyone like Clarke he has ever seen.

MARTIN: Well, it is not unheard of for administrations to assail the credibility of persons who can do them political harm. You'll remember that during the Clinton administration, an FBI agent named Gary Aldrich wrote a very ugly book about the Clintons. Sort of suggesting that their nighttime activities were, you know, unsavory. He was very much attacked.

And then there was, of course, Linda Tripp who played such a central role in the Lewinsky case. She was lambasted as a person who was lacking in credibility. A disgruntled ex-employee and so forth.

What's different here though is those persons had proximity to principals. This is a principal. I mean this is a person who had a real job, an important job and worked at a very high level in The White House for years.

And what he is saying is that this President failed in his job. I mean I think that everyone would agree that September 11th was a terrible event in the life of our country. And what he's saying is; more could have been done to prevent it that was not done. And that is a referendum on performance.

MOYERS: But there is a lot of nuance in this. I mean isn't it sometimes just one person's interpretation of the same event. Like two people will see something totally different because of their own DNA and their own angle of vision.

MARTIN: In fact that is true. In fact I had an opportunity to talk to Mr. Clarke at-length, and I said; could this be an example where persons review the same set of facts and come to different conclusions? And he said; absolutely.

But if you read the book you will find that it is, in fact, fairly nuanced. He is very clear this is his point of view. But what they're arguing over, I think is really the political stakes. Because the President has so staked his re-election chances and in fact his performance as President on national security. And The White House cannot afford to have it be said or have it be believed that he did not perform adequately in this area.

MOYERS: Do you think he's telling the truth?

MARTIN: Well, I think at this point it's more important what the citizens think, what the voters think. Because that's really what this is all aimed at. But I would have to say that the criticism of The White House is, that this is a man who is disgruntled, a disgruntled ex-employee, and that he is lacking in credibility.

If that is the case, why was he permitted to perform in these high level positions for as long as he did? Now they say he was eventually demoted. He says he asked for a transfer because he didn't think The White House was serious about the work that he was tasked to do.

He also says, and I asked him well, why didn't you just resign? He said because he still felt there was important work to be done. So the question is if this man was as erratic, unstable, kind of the unspoken question here; you know obsessed, not to be believed. Why was he permitted to work in such important jobs for so long?

MOYERS: Condoleezza Rice claims a key conversation that Richard Clarke says he had with President Bush never took place. Now both CBS NEWS and THE WASHINGTON POST have verified that that conversation did take place.

MARTIN: Well ABC NEWS as well.

MOYERS: You did?

MARTIN: There were persons who were interviewed who were present for the conversation. And so that… who have also verified, independently, that the conversation did take place.

MOYERS: What was that conversation?

MARTIN: The conversation was about whether Iraq came…how soon Iraq came up as a target. As a… was linked to the September 11th attacks. And that is an important question, because Clarke's…one of Clarke's central thesis is that Iraq was so important to key members of this administration, that they didn't do the things they needed to do about the most important sources of terror which was Al-Qaeda.

And the White House says that simply isn't the case. That they gave Iraq it's appropriate weight. And he says that as soon the President got to the Situation Room he said he demanded that Clarke go back and look at all the evidence that pointed to Iraq.

And the other argument is whether he asked that military plans be drawn up for the invasion of Iraq as soon as… maybe days, just days after the September 11th attacks. Dr. Rice says that that isn't true. That Iraq was taken off the table.

But here again, as a matter of dispute. I mean the administration would argue that the President would have been negligent if he didn't evaluate every target. It's a question of how much weight do you give to that conversation? Obviously, Dick Clarke is a great weight. This is not some kind of, you know, squishy liberal who you know thinks that you need to hug the terrorist and you know find out what went wrong in their childhoods.

I mean, the book on him before the Bush Administration was that he was too aggressive in seeking a military response to terrorism. I mean here is a guy who wanted to bomb the training camps in Afghanistan. And the reason that this argument did not prevail, it was believed at the time, that there was not the political consensus to support that either domestically or internationally. But it just has to be remembered that the criticism of this man before the Bush administration was not that he was soft. But that he was too quick to react.

MOYERS: One of the president's top political strategists, Charles Black has been reported as saying, you know, this will all blow over by this weekend. Next week, the agenda will change, we'll be talking about something else. And then the Michel Martins of the world will be reporting what we're talking about. Do you think that's going to happen in this case?

MARTIN: You know, I don't know. You know, that is an entirely plausible scenario, given the short attention span of the media, the short attention span of the public, it has to be said.

MOYERS: And you think that ability of government to lead the pack?

MARTIN: The ability of government to set the agenda for what it is that we talked about. And frankly, there are a lot of things on people's minds. I mean there was another big story in Washington this week, which is Medicare. That the… you know, there was additional information presented that the cost of the Medical bill that was passed last year was presented at a time far below what it's actually going to be.

And there's been a huge outcry over this. And whether that information was suppressed. It's a very important story. The Medicare actuary says that this program is going to go bankrupt. It simply will not be available if something isn't done.

This is a terribly important story and it affects a lot of people. So, sure, lots of things are competing for the public's attention. But the war on Iraq is ongoing. And people are continuing to sacrifice for their country to wage this war. And it is an ongoing question about whether this is an appropriate policy or this is the right policy to address September 11th.

And in the long run, which is the ultimate question, whether Americans are safer today than they were before.

MOYERS: In a polarized time like this, how should we journalists work? I mean is the he said, she said school of journalism sufficient.

MARTIN: Well, sometimes it's all we have. I mean if you do have a situation where you have eye witnesses to the same event whose recollections do not match, it really is your responsibility to report both of them. I don't know what else you can do. I mean it is… you know that's my role, anyway. I mean other people can, you know who are editorial writers, can sort of take the position of who they really think is telling the truth.

But, I mean I do think we have some…a stand… You know, we do have a responsibility to establish a threshold of credibility. But I think Richard Clarke's service in this case meets that standard.

MOYERS: But didn't you hear that there was not enough investigative reporting in Washington? That we do take the he said/she said approach, we do take what government said. And we find somebody, it's the seesaw, the liberal versus the conservative, the democrat versus the republican. Shouldn't we be connecting the dots more for the people?

MARTIN: I don't know, we live in a time where people challenge authority at all levels. And they also challenge the authority of the media to connect the dots for them. You can hear people say "I want to make up my own mind." I mean, I think that's behind some of the popularity of the, you know, Internet news sources, you know, people call them blogs.

They're just basically Internet news sources that people are generating their own sources of information and putting it out there for the public to evaluate. It's fine for someone the do that. But I would also argue that's not a wrong thing to do in a democracy. And frankly, you know, as a reporter, it doesn't trouble me that people want to evaluate what I say in the context of what they see from other sources.

I mean that's what I'm doing. I'm making very fast judgments about what I think is most important and my colleagues, I know, I tell you… I can tell you that the night that I was writing about the hearing, the first night of the hearing, I was looking at my competition. I was looking at the news shows, I was looking at the wires to see what they thought the lead was. As it happened, I didn't agree with them.

But I wanted to know, what's your take on this. And the fact that there were so many different points of view about what the most important thing was to write about that day, you know, that doesn't trouble me.

MOYERS: You know, one of the most fascinating things to me is that back in 1999, a commission, a high level blue ribbon commission appointed by President Clinton and Speaker of the house, Newt Gingrich, chaired former senator Warren Rudman, and former Senator Gary Hart, a master security commission.

Gave us a warning about this. They… that commission, in both the interim report and the final report, warned that America's are going to die on our own soil. That there could be attacked against high-rise buildings. It was a very important story.

And Michel, it was virtually ignored. It was blacked out. By the WALL STREET JOURNAL and the NEW YORK TIMES. Nobody paid attention to the Rudman-Hart commission. Including the press.

MARTIN: Well, you know, it's a hard thing to think about. I mean it's a hard, you know, just reading this book… I mean, the opening pages take us back to September 11th. And I could just feel my heart rate going up. Just remembering that day. Remembering the subsequent days.

It's a very hard thing to think about. You don't want to think about what you're… what are you going to do with your family? Where are they going to go? I mean do you have… how does everybody meet up? To think about these horrible deaths that attend terrorism is just something that most of us don't want to do. Now that's not an excuse for neglecting your responsibilities, for putting things on the agenda. And trying to make people think about the unthinkable.

But you know, I take my same share of responsibility for that. I mean it's all… we all have… we all, you know, missed the ball in some ways.

MOYERS: My frustration as broadcaster is that we always run out of time. What was your biggest frustration this week covering this remarkable story?

MARTIN: The same, time. The time. I mean I found it riveting. And I realized that, you know, part of what we do is, you know, we sit in the meetings that our viewers don't have time to do. You know other people, you know, they have things to do. They have their jobs to do. And our job is to sit there for them. And…but… I found it utterly riveting.

I mean these are very important questions. I mean these are questions of life and death and these are questions about, you know, what can be done. What could have been done to save all of these lives and to save lives in the future. And I think… but I also think it's a… I know there was a tone of bickering that was unbecoming, I think, in many ways, I think.

That certainly many of those family members of September 11th victims found unbecoming. On the other hand, this is still a country in which our highest level of officials are called before the public to give their account. And they did so. And I think that that's very important to remember.

MOYERS: Well, thank you for joining us today. And I'm very pleased that you're going to be coming back over the coming months of this election year to join us here on NOW.

MOYERS: During his first three years in office, President Bush has funneled tens of millions of dollars to churches to use for social services. Congress refused to approve the President's Faith-Based Initiative, as he calls it, but he acted anyway  by Executive Order, on his own, despite criticism that he was going around both Congress and the Constitution.

The President also wants federal dollars for vouchers that will enable students to attend private and religious schools…what he calls "choice." Congress has refused. So once again the President is doing it his way. Leslie Sewell produced our report and with it we welcome the newest member of our NOW team, correspondent Michele Mitchell.

MITCHELL: Our President is a marathon runner, which means he's got tenacity. So when, that pesky branch of government known as Congress twice killed his push for school vouchers  public funding for private education  well, that only meant he had to find another way. And he did.

BUSH [FROM TAPE: July 2, 200]: When we find children trapped in schools that will not change, parents must be given another viable option.

MITCHELL: He found his option by going through the Department of Education, where no congressional approval was needed to free up $77 million in taxpayer money…to advance an agenda of using public money to privatize public education.

This story is about who got it, why they got it, and what they're doing with it. The private conservative groups that got funding all share a common agenda: directing tax dollars to private and religious schools, something they call "choice." Seed money, really, for a conservative movement that would transform public schools and do so beyond public control. And these groups have a key friend in this government.

EUGENE HICKOK, UNDERSECRETARY OF EDUCATION: When I joined the administration I severed all ties with all these organizations.

MITCHELL: This is Eugene Hickok. He helped form two of those organizations before he became the Undersecretary of Education; he met the folks behind many of the other groups while heading up education for the state of Pennsylvania. He's got some weight when it comes to who receives that $77 million.

MITCHELL: And how do you decide what programs are deserving of the investment?

HICKOK: Well, as a matter of fact, it's called the Fund for the Improvement of Education. It is the only truly discretionary money the Secretary has.

MITCHELL: Discretionary means the secretary can give it to whoever he wants, without having to ask Congress. And the organizations that actually got money had a single goal: to steer public opinion away from public education toward mainly private alternatives, like those school voucher programs, where private academies would be reimbursed for the cost of teaching students who choose to opt out of public school systems.

It's a tough sell. Vouchers have been consistently voted down in the states for nearly 30 years. But the President hasn't stopped selling.

BUSH [Milwaukee, July 2, 2002]: You call it whatever you want to call it  vouchers, choice, whatever it is. Freedom for parents is what I call it.

MITCHELL: This push for school vouchers has been a windfall for the President's campaign buddies. If you are a Republican pal, or you donated money to the party, or you've been active in conservative education circles, then your day has arrived.

MITCHELL: You guys have been criticized recently by several groups saying, well, a disproportionate amount of that very small discretionary money…

HICKOK: Sure.

MITCHELL: …is going to a handful of groups that are…

HICKOK: Pushing choice. Sure. We believe in choice. That should come as no surprise. Every administration pushes their priorities.

MITCHELL: Pushes priorities and business opportunities for a handful of private, conservative organizations that promote the idea of "choice": school vouchers and  not so coincidentally  all received chunks of that $77 million in taxpayer money.

HICKOK: It would be unusual for President Bush or Secretary Page to not support something that they believe can improve public education.

MITCHELL: But remember, this money is going to promote private alternatives to public education. And look at who's getting that taxpayer funding.

Groups like K-12, a profit-making company run by Bill Bennett. Who's he? Bill Bennett: Ronald Reagan's former secretary of education, who has spent decades railing against public education. Here's his company's Web site. According to the department's own numbers, Bennett's group got 14 million taxpayer dollars to promote "virtual" home schooling.

MITCHELL: The Education Leaders Council was Undersecretary Gene Hickok's outfit before he joined the administration. Since then, it got nearly $16 million to promote a new program tracking school performance over the Internet.

And that same group started the American Board for Certification of Teacher Excellence, billed as a conservative alternative to teacher certification. Now, Home schoolers can become teachers by taking an Internet exam. This new program got $35 million.

And those numbers don't include the additional $12 million going to other groups, many with overlapping boards of directors, who are selling the idea of school vouchers to targeted audiences: white suburban soccer moms, African Americans and Hispanics.

LARRY NOBLE, CENTER FOR RESPONSIVE POLITICS: Well, it is part of the game. Obviously, when you get into office, you look at who put you there, who your big supporters were, and you try to help them in some way.

MITCHELL: Larry Noble tracks the money trail for the nonpartisan Center for Responsive Politics. It isn't unusual, he says, to see this kind of action happening in, say, the Department of Defense, where the "military industrial complex" lives on. But remember, in this case, Congress hasn't approved the money.

NOBLE: When you're dealing with discretionary funding, you're dealing with funding that is much more open to just very subjective judgments of who should get it. And then what you have to do is look at who is getting the funding. And what you see often are friends, people who have supported the administration, contributors to the administration are getting funding.

MITCHELL: Take, for example, Hispanic CREO, which means "I Believe." They got $500,000 in taxpayer funds from the Department of Education to promote school vouchers. So far, the most visible evidence of this money is very nice, high rent office space at the Watergate, glossy brochures, a fancy Web site, and sponsored dinners.

Robert Aguirre, the Texas businessman who started the group, is a major player in the small world of education conservatives.

ROBERT AGUIRRE: I work specifically in the world of school choice, which is even smaller. And yes, you run into the people all the time, the same people all the time.

MITCHELL: Hispanic CREO launched nationally in 2003.

AGUIRRE: Congratulations, it's a movement!

MITCHELL: It's a movement alright…but Aguirre says it wasn't just that he knew the right people. Hispanic CREO planned its launch very carefully.

AGUIRRE: We have been working on this for years. And the people who have worked on this have been people who are, to a large extent, people like me, who are business people. Who plan and who do their homework.

MITCHELL: In addition to this half million dollar taxpayer-funded project, he also runs one of the largest private school voucher programs in the country. It's a classic example of how taxpayers' money is feeding into organizations that are pushing what they call choice.

Aguirre's program is supported largely by a powerful, multi-millionaire known as the Republican "Kingmaker" of Texas. Dr. James Leininger stays out of the limelight, and he never talks to the press  including me. But he's given millions to state and national Republican causes and, according to the NEW YORK TIMES, is a major contributor to the first college for Christian home schoolers: Patrick Henry College.

The fact is money attracts money. And these tens of millions of taxpayer dollars in grants may eventually generate hundreds of millions more in private donations, all in hopes of changing both public opinion and votes in Congress to support vouchers.

I asked undersecretary Hickok if there are businessmen saying that school vouchers  choice  were about to become a growth industry.

HICKOK: Well, they're saying it right now. I mean there are investors in business organizations all over the country who are looking at the education quote, "industry" as you call it as just that.

MITCHELL: But while taxpayer money for public education is being used to promote privatization, the public schools themselves continue to struggle. Fourteen states are criticizing the administration for underfunding by $8 billion its centerpiece program, No Child Left Behind. And that's just the tip of it.

PRESIDENT BUSH [February 13, 2004]: No child left behind. I like the sound of that.

MITCHELL: It always sounds great when politicians talk about improving education, But in fact, the 77 million dollars, by promoting private alternatives to public schools may hurt the long term funding for public education.

BROWN: And we have many schools that don't have viable science labs. Many schools that don't have mathematics labs.

NORTH: Computers in our schools. We have very few computers. The lower grades do not have computers. There are only a few in the upper grades, and they even don't work.

RODRIGUEZ: I'm sure that if they put the amount of money into this education system, as they do into the marketing of vouchers, that we would see a significant change.

MITCHELL: It's struggles like these, says Larry Noble, that make the privatization of education such a tough sell on Capitol Hill. And he says, that's why the administration looked for the seed money in a different place to begin with.

NOBLE: If you can't get the money from Congress directly, because there's a lot of opposition to the school voucher program. A lot of thought that it takes money away from public education, then what do you do? Well, you go to your friends within the administration, you go to your friends within the Department of Education, and you go after the discretionary money. The money that they can give out without having to really answer to Congress, without having to really answer to the American public.

MITCHELL: But remember, this is not just about promoting an agenda Congress never approved. There are serious questions about how this money is being used, or misused, who's making money, or wasting it. Case in point: Hickok's old outfit, the Education Leaders Council, run by this woman: Lisa Graham Keegan.

LISA GRAHAM KEEGAN: You don't think anybody's making money off of education? Big secret, it's happening. People make millions. I mean, this is…

MITCHELL: On all sides?

KEEGAN: On all sides of this issue.

MITCHELL: Keegan knows about the business of education. In addition to running the Education Leaders Council, she is the former head of education in Arizona, where she championed school vouchers. She's pretty much a founding member of this new conservative education complex.

KEEGAN: You know, we were like an Alcoholics Anonymous convention. "My name's Lisa. I'm a reformer." "Hello, Lisa." I mean, we had nobody to talk to.

MITCHELL: Keegan has run into trouble because a large chunk of that $16 million in taxpayer money which went to her organization stayed right in the office. An audit, ordered by the board of directors, found that too much money was being spent on salaries; that 61 percent of the company's payroll was improperly charged off against the federal money.

Keegan says she's done nothing wrong, and her response to the charges is an ironic detour on this money trail. Because she says the real reason she's being criticized and her job is being threatened is that she awarded some of that federal money to Democrats.

KEEGAN: Our feeling at ELC is, look. We're looking for best product. It just so happens the best products we could find have been produced by people who are known Democrats. And to me, that's fabulous. Great. Who cares? You know? Actually it might surprise people when we go out and contract for people or for business, we don't say, "What is your party affiliation, and have you ever given money to people we don't like?"

MITCHELL: Are you being accused of not being Republican enough?

KEEGAN: Yes. I'm being accused of not being Republican enough. And it wouldn't be the first time.

MITCHELL: Her solid Republican pal across town, Undersecretary Hickok, says he's keeping his distance these days from his old organization.

HICKOK: It doesn't mean I don't keep up with what they're doing obviously. But my sense is they're got some management challenges. They've got some grant administration challenges.

MITCHELL: But the real challenge is to follow the money flowing through these bureaucratic backchannels. This is public money for private schools. Money neither Congress nor voters have ever approved. And now, these tens of millions of taxpayer's dollars are being used to market a radical approach to education at the expense of traditional public schools.

ANNOUNCER: Next week on NOW, the Bush administration is now talking openly about the possibility of using nuclear weapons against terrorists.

TURNER: There is a club in our security establishment that loves nuclear weapons.

ANNOUNCER: Research into a new generation of nuclear weapons is already underway. Could designer bombs make it easier to break the taboo about first use?

Next week on NOW.

ANNOUNCER: And connect to NOW WITH BILL MOYERS Online at pbs.org.

Find out more about the 9/11 Commission. And what the victims' families still want to know. Tell us what you think about school vouchers. Compare executive pay packages around the world.

Connect to NOW at pbs.org.

BRANCACCIO: Now the truth about what's going on on Wall Street. Prosecutors are going after some of the worst of the alleged business baddies. A jury is wrestling today with the fate of Dennis Kozlowski, the former Tyco chief accused of playing with his shareholders' money as if it were his own. But despite all the scandals, CEO pay is back up.

And the many corporate boards reign less than vigilant when it comes to policing the managers that they're supposed to be watching. How is truth and accountability doing in this arena? For answers, we turn to one of the world of money's sharpest observers. Allan Sloan is NEWSWEEK Magazine's Wall Street Editor. Nice to see you, Mr. Sloan.

SLOAN: My pleasure, Mr. Brancaccio.

BRANCACCIO: I was just examining the back of a $10 bill. It says, "In God We Trust." Do you suppose now this spring it's time that we can extend that trust to anybody else who you routinely cover in your beat?

SLOAN: Possibly so. But though you've left out the second part of that line which is, "All Others Pay Cash."

BRANCACCIO: That's why there's cash in my hand.

SLOAN: Well, that's right.

BRANCACCIO: Trust. Is it back?

SLOAN: There's more than there was but not as much as there should be. Now, how's that for an evasive answer? But a true one.

BRANCACCIO: People are starting to get religion on this point. The changes that Congress made, the SEC in some areas cracking down have changed minds.

SLOAN: Well, they've changed minds. And to some extent, put the fear of the Lord in people. And I think the one who's done more than anybody is Eliot Spitzer, the New York Attorney General. And I'm not a shill for the man. But he's terrorized these people.

And what's happening now is with all of the Sarbanes-Oxley stuff which no one, frankly, understands.

BRANCACCIO: Sarbanes-Oxley, by the way, is the name of the big legislation package that went through Congress a couple summers ago that increases disclosure for companies, among many other things.

SLOAN: Right, and by the time we're done, which will take about a year, you'll just have six more paragraphs of gibberish. And things will resume pretty much the way they were. And the dishonesty will take a different form. This is the nature of Wall Street.

I have a much simpler version of how all this works. Which is you just do the right thing.

BRANCACCIO: What a concept.

SLOAN: I know. It's too simple. You tell the truth. You report profits that are actually like profits. You take the news, whether it's good or bad, and you disclose it in a language approaching English. And that's how you do it. And there are a lot of people who've done this the right way for years who now have to leap through hoops because of Sarbanes-Oxley.

And then there are other people we will call the trolls who will figure out some way to do it badly but within the confines of the new laws. And, I mean, life is like this.

BRANCACCIO: Now, you've heard of this guy Warren Buffet, right?

SLOAN: I have.

BRANCACCIO: The legendary investor. I've never met the man. I don't know if you've…

SLOAN: I have. And he's the director of my company for disclosure, THE WASHINGTON POST Company. And I own quite a lot of his of stock in my 401K plan.

BRANCACCIO: Okay.

SLOAN: I'm sorry to interrupt but I have to say this quick…

BRANCACCIO: My my goodness. We could put… under the street, right?

SLOAN: The lawyers will get me.

BRANCACCIO: The reason I bring up Warren Buffet is his quote is this. The acid test for him with whether or not these reforms of all this bad behavior on Wall Street are taking root, the acid test is if he sees executive compensation, what we pay these CEOs, linked to the performance of the companies. And I was looking at some new data, executive bonuses are back big time. In fact, the early numbers coming in suggest that the bonuses that we're giving to CEOs are now approaching the peak of the Great Boom of the 1990s.

SLOAN: Well, you see, David, once again you have failed to appreciate what the word "performance" means. Performance means did the stock go up? I mean, that's not what Warren means. But generally speaking, if you look at all these compensation packages and contracts a lot of it is tied to the price of the stock.

SLOAN: You may have heard that in 2003 stock prices went up.

BRANCACCIO: Yeah, saw some headlines.

SLOAN: Yeah. And a lot of these contracts and stuff have the pay based on the stock price. So the stock price goes up. So, therefore, the bonus comes in. The real key will be what happens when there's a bad year in the market? Will they pay rate go down? Or will they say, "Gee, well, it was a bad year in the market and we have to keep these guys around. So we'll change the formula to give them more money anyway." That's when we'll see.

BRANCACCIO: Now, I almost can't blame corporate executives for asking for these pay packages. It may be human nature. What I'd like to blame is maybe these boards of directors who are supposed to be watching out for this kind of stuff. We need to do something about corporate democracy, I think.

SLOAN: I don't know if we need to do something about corporate democracy because, in the end, corporate democracy will turn out to be your old buddies in California, CalPERS, the state employees' investment fund.

BRANCACCIO: Probably the biggest international investor in the planet.

SLOAN: Right, right. Democracy will consist of them and three big index funds voting in the people they want at these companies. It's not as if it's gonna be Bush v. Gore where it's gonna be vigorously contested in 50 states and recounts. I mean, democracy means quite a different thing in the world of Wall Street as it does in the real world.

BRANCACCIO: Well, it's true that the big institutional investors own a ton of the stock. I think I saw a figure once. John Bogle of Vanguard shared this with us on this very program. The way he has it figured, the top 100 investment firms in America own more than half the stock in all of America. About 56 percent. And he says it's okay if they're the ones forcing change in companies. Like we saw just this week, some very big Disney shareholders are still rattling the cages of Disney management about performance.

SLOAN: Oh, oh, sure. But, again, you know, democracy is fine in the abstract. But again, look what happened at Disney. I mean, it's an astounding thing. Forty-three percent of the shares voted against keeping Mr. Eisner in office. And that's the point at which Mr. Eisner is supposed to faint from shame and slink off the stage and be embarrassed.

BRANCACCIO: But 43 percent is very big in this context.

SLOAN: It's huge. I mean, any time more than ten percent of your stock votes against you, it's really time for you to think of finding something else to do. Because, again, this is not Bush v. Gore. This is like a Saddam Hussein referendum where there's no opposition. So not only do they keep Eisner who got 43 percent no, they appoint as the chief executive for this great reform Senator Mitchell who got 24 percent no, don't call it reform.

BRANCACCIO: We've been talking here about can we trust corporate numbers. Can we trust Wall Street. What about trusting government numbers? One of the big stories of this week was that the Social Security trust fund came out with its yearly accounting. And looks like  and I say this affectionately, Allan  you'll be long dead before there's any problem with Social Security.

SLOAN: Well, that may be. Though the line I've used to not much effect but I keep trying is that if any corporation kept books like the federal government, they'd all be in jail.

BRANCACCIO: Really?

SLOAN: Because of the new Sarbanes-Oxley. Because the federal government has its own rules. Now, the people who run Social Security are the most honest and upstanding people in the world. The way it's accounted for and all of that is bizarre and crazy. And they have this concept of the trust fund which A) has no funds. And B) I certainly don't trust it and neither should you and you're younger than me. So…

BRANCACCIO: Well, why are you so worried? Because, look, there'll be this massive trust fund. And all that happens in 2018 is that we start pulling some money out of that trust fund.

SLOAN: Right. The problem is what does the trust fund consist of?

BRANCACCIO: What's in there?

SLOAN: IOUs from the federal government to Social Security. Known as Treasury securities. They're IOUs from the government to the government.

BRANCACCIO: But they're Treasury securities. What's so bad about that?

SLOAN: Nothing's wrong with that. The question, though, is let's say some time in 2018, the guys at Social Security need $5 billion and they call the Treasury. And they say, "Boys, take $5 billion of our securities out of the fund and send us $5 billion. We need the money or the checks will bounce. It'll be a big embarrassment to everybody."

So what happens is how does the Treasury get the $5 billion dollars? Well, it'll borrow it from you 'cause, I mean, you're a TV star. It'll cut programs. It'll raise taxes. It'll do something to get its hands on $5 billion. It's as if… and it's always dangerous to use analogies when you're dealing with the government. Let's say you decided to retire and you wanted to put money aside for your old age. 'Cause, you know, you're gonna get old. So it's one thing if you take your money and you buy stocks. When the time comes you can cash in the stocks and it's not any burden on you. But let's say instead of buying stocks you say, "Well, I'm… I trust myself." And you put an IOU in your desk drawer. So when you retire, you open your desk drawer and there's $2 million of IOUs to yourself. How do you get the money? Well, you get the money the same way you'd get it if there were no IOUs. The IOUs are of no use when the IOUs come from the same people who have to pay the money.

BRANCACCIO: Now, the lobby group for older people, the AARP, very powerful group, has spent a lot of time thinking about this. And if you ask them, they say, "Those aren't IOUs. They are U.S. Treasury securities." These things always work. The government never goes back on its word to pay off those things.

SLOAN: Well, let me tell you. It's not a question of the bills are good or bad or whatever. The question is how does the government get the money to pay them? Because, again, if you really believe in this trust fund, you believe that 20 years from now our children, my children anyway, are gonna shell out $100 billion, $200 billion, $300 billion, $400 billion a year to keep Social Security whole. And it's not going to happen.

BRANCACCIO: Now, a lot of people who hear arguments like this, that Social Security really is in trouble even though the government isn't telling us that, think that that is an argument in disguise that you're making for Republican plans to privatize Social Security. That you're just talking down Social Security so that investment bankers on Wall Street can get a piece of this retirement action.

SLOAN: That's not what I'm doing. I don't know what I would do with Social Security, okay? But the fact is there's a long term problem there. And the longer you wait until you fix it, the worse the fix is gonna be. There's a huge number of people, including my parents, may they rest in peace, who lived on Social Security and nothing else.

And if you look at the numbers, this system is not going to work. Privatizing the system doesn't work either unless you're willing to do a whole lot of things like cut the guaranteed benefits very sharply. And do a whole lot of stuff that's really, I think, too complicated even for you to do on TV. I mean, but it's a very complicated system. So…

SLOAN: Well, what's gonna work is that if you make me king of the world or king of the United States only for a year and then I could retire. First, I'd do is give myself a big pension. The second thing I'd do is A) I do what needs to be done, which is I raise the retirement age for people in the future. I change the way benefits are calculated so that people down the road will still have Social Security but it'll be less than called for under the current formula.

And then what I would do as long as we have a surplus of Social Security, is instead of investing the surplus in Treasury securities where, by the way, it also messes up the federal budget because it makes the deficit look very small relative to what it really is. I would say let's buy mortgage bank securities, maybe student loans, maybe corporate securities. In other words, to have the Social Security trust fund own things that are not the federal government. So that when you're paying off your mortgage and the money makes its way into the pockets of Social Security recipients. And they come to you instead of coming to the government. It's not difficult.

BRANCACCIO: And it would have the groovy effect of each time I paid one of my mortgage payments each month at some exorbitant rate for some giant house I'd be helping my retirement in some perverse way.

SLOAN: Well, that's right. And then when your kids over-extend themselves they'll help yours. And that's as it should be.

BRANCACCIO: All right, Allan Sloan, NEWSWEEK magazine. Thanks so much for having stopped by.

SLOAN: My pleasure, sir.

MOYERS: President Bush spoke eloquently the other day about what the war on terror requires of us. Here is the main point he made:

PRESIDENT BUSH: The war on terror is not a figure of speech. It is an inescapable calling of our generation.

MOYERS: Those words ring true. Whatever drives them, whatever grieves them, Islamic fanatics have declared war and seem willing to wage it to the death. If they prevail our children will grow up in a world where fear governs the imagination and determines the rules of life. Mr. Bush clearly believes what he said: The war on terror is an inescapable calling of the generation now in charge.

Like many of you, I want to support him in that work; I want to do my part. But the president makes it hard. He confused us by going after Saddam Hussein when the villain behind the mass murders of 9/11 was Osama bin Laden. He seems not to realize how his credibility has been shredded by all the false and misleading reasons put forth to justify invading Iraq; Lyndon Johnson never recovered from using the dubious events at the Gulf of Tonkin as an excuse to go to war in Vietnam, and even if Mr. Bush wins reelection this November, he, too, will eventually be dragged down by the powerful undertow that inevitably accompanies public deception.

The public will grow intolerant of partisan predators and crony capitalists indulging in a frenzy of feeding at the troughs in Baghdad and Washington. And there will come a time when the president will have no one to rely on except his most rabid allies in the right wing media; he will discover too late that you cannot win the hearts and minds of the public at large in a nation polarized and pulverized by endless propaganda in defiance of reality.

So what to do? How to assure we win this war?

The hearings in Washington suggest a start. It is clear now the Bush White House bungled the warnings about Al Qaeda, but it's also clear that the Democrats under Bill Clinton made plenty of mistakes, too. Why can't both parties come clean, apologize, and start over?

Either party could lose this war but both parties together just might win it. Why not a wartime cabinet to serve a wartime nation? Al Gore as head of Homeland Security. Gary Hart at Defense. The John McCain or independent Warren Rudman at State. The world would get the point: This time we mean it, all of us  the war on terror no longer a partisan cause.

Surely, too, there are ways to subject all of us to a draft. The president put it well in another speech last week.

PRESIDENT BUSH: I've seen the spirit of sacrifice and compassion renewed in our country. We've all seen our country unite in common purpose when it mattered most.

MOYERS: Those words ring true, as well. But so far sacrifice has been asked only of the men and women in uniform and their families. Nearly 600 dead since the war began over 400 of them since the President landed on that aircraft carrier under a banner reading "Mission Accomplished."

Even now the privates patrolling the mean streets of Baghdad and the wilds of Afghanistan are making less than $16,000 dollars a year in base pay, their lives and limbs constantly at risk. Here at home, meanwhile, the rich get their tax cuts  what Vice President Cheney calls "their due". Favored corporations get their contracts, subsidies and offshore loopholes. And even as he praises sacrifice the President happily passes the huge bills that are piling up on to children not yet born.

My thoughts started running on this track a couple of weeks ago when my wife and colleague Judith found this in our attic  a relic from another time. A ration book, issued by the OPA (the Office of Price Administration) with stamps for the purchase of essential goods. The date on it is 1943. You can barely make out the name  the alias my mother gave me at birth, "Billy Don Moyers."

I was nine years old at the time, and America was fighting a war on two fronts, against Nazis and Japanese warlords. Just about everything vital was going to feed the war machine, so just about everything was rationed: Gasoline, tires, sugar, butter, meat, tea, diapers, kitchen utensils, lawnmowers. When stockings became scarce women painted seams down their calves to simulate the real thing.You stood in line to get scarce items: and all of us were called upon to eat less, drive less do without.

Kids weren't exempt. I took this book with me to the store, and tore off exactly the number of stamps required to buy something. I never used all the stamps in this one book  that's how parsimonious people were. Or maybe it was patriotism. Anyway, I think of this as a kind of war souvenir, a keepsake to remind me that victory on the home front began at 801 East Austin Street.

Where does it begin today? Mr. Bush hasn't told us. I believe him when he says the war on terror is the inescapable calling of our generation. But it is one thing to say it, and yet another to lead all of us, and not just a partisan few, to answer it.